Update: Hearing to Approve Sale of Wadley Regional Medical Center Rescheduled

A Google Street View image of Wadley Regional Medical Center in Hope in 2013 (© Google)

Update: The hearing that was scheduled for Tuesday in U.S. Bankruptcy Court in the Southern District of Texas to approve the sale of Wadley Regional Medical Center at Hope has been rescheduled. 

It is now set for Friday.

Original story: Hempstead County officials expect the sale of Wadley Regional Medical Center at Hope to be approved by a bankruptcy judge on Tuesday, putting the operation of the hospital in local control.

“There’s still a lot of work to be done on the facility,” said Anna Lee Powell, president of Hempstead County Economic Development. “And we will need our state government, our local elected officials to lobby for emergency funding to support us through this process.”

Hempstead County and the city of Hope have pledged $1 million each to buy the hospital’s real estate from Medical Properties Trust Inc. of Vestavia Hills, Alabama, Powell said. Hempstead County Economic Development also is a partner in the project as well, she said.

Pafford Medical Services Inc. of Hope, an ambulance and health services provider, has agreed to buy the 79-bed hospital. Pafford, through its entity called Pafford Health Systems Inc., will pay $200,000 and assume some liabilities to acquire the hospital from its parent company, Steward Health Care System LLC of Dallas, which filed for Chapter 11 bankruptcy reorganization on May 6.

“So you’re talking about the health care license in one piece, and then you’re talking about the real estate in another,” Powell said. “They’re both contingent upon each other.”

The U.S. Bankruptcy Court in the Southern District of Texas was scheduled to approve Steward’s sale to Pafford on July 31, but that court hearing was rescheduled for Aug. 13.

After the bankruptcy judge approves the sale, Wadley Regional would be operated by the newly created Southwest Arkansas Healthcare Authority, and the hospital would be renamed Southwest Arkansas Regional Medical Center.

Steward, one of the largest private, physician-owned health care networks in the country, has 31 hospitals and more than 400 locations across the country. It also operates the Wadley Regional Medical Center in Texarkana, Texas. Steward recently received approval for a $225 million loan to keep its hospitals open while it moves through the bankruptcy process.

Steward said in bankruptcy filings in the Southern District of Texas that it had about $1.2 billion in debts and about $6.6 billion in long-term lease obligations. Steward’s estimated assets are between $1 billion and $10 billion.

Steward said it struggled financially, as did several hospitals across the country, for several reasons, including rising supply and labor costs and reimbursement rates that didn’t keep up with inflation.

Wadley Regional Medical Center also faced financial challenges. For the fiscal year that ended Sept. 30, it reported a loss of $4.25 million. The previous year it reported a loss of $2.9 million. Meanwhile, Wadley Regional’s net patient revenue was falling, dropping from $13.1 million in fiscal year 2022 to $10.6 million a year later.

Wadley Regional Medical Center at Hope

(Fiscal year ended Sept. 30)

Source: Medicare cost reports (most unaudited) filed with the Centers for Medicare & Medicaid Services. Audited and unaudited net income may differ substantially because hospitals subtract recoverable costs not recognized by Medicare from operating expenses before deriving final net income.

Powell said that “a lot” of money would be needed for Wadley Regional. “This is a state of emergency for our community,” she said. “And we’ve handled it well, … but we also know that there’s going to be help needed.”

Pafford is looking at long-term upgrades for the hospital and its equipment, but for now, the company and local stakeholders are focused on finalizing the deal with Steward, Clay Hobbs, chief operating officer at Pafford, told Arkansas Business last month.

Keeping the hospital doors open was vital for the county of about 21,000 people and surrounding counties, which don’t have a hospital.

If the hospital closed, it would not only impact area residents, but companies that operate factories in the area, said Hempstead County Judge Jerry Crane. Some manufacturers had agreed to come to the county because it had a local hospital, Crane said.

“If someone gets hurt at a plant or something, we want to know we can bring him straight to the hospital here and not have to drive 45 minutes away to get somebody somewhere for help,” he said.

Pafford Medical Services decided to buy the hospital because southwest Arkansas is its home, Hobbs told Arkansas Business recently.

“And we just wanted to work together with our county and our city to shore up health care in the community and in the region,” he said. “Our surrounding counties don’t have hospitals, which makes our hospital even more important, I believe, to the viability of southwest Arkansas.”

He said it made sense for Pafford to buy the hospital to stabilize health care in the community. Hobbs will be on the board of the Arkansas Health Care Authority.

Snowball Effect

Wadley Regional was founded in 1955 as Hempstead County Memorial Hospital. It was acquired by Steward in 2017.

Steward was formed in 2010 after buying a struggling six-hospital system in Massachusetts. It then grew into a large health care network.

In the wake of COVID, however, “Steward has dealt with a number of operational challenges and negative market trends that have eroded its earnings and liquidity over the last several years,” John Castellano, chief restructuring officer for Steward, said in a May bankruptcy filing.

Those problems included lagging reimbursement rates, as well as declines in patients and revenue, the rise in labor costs, inflation and “more recently, regulatory and political pressure,” he wrote.

Those pressures “exacerbated Steward’s liquidity issues,” Castellano said, “resulting in pressure from vendors and creditors, limited access to supplies and equipment, further reducing revenues and creating a snowball effect that resulted in significant trade claims and the Debtors needing to seek a series of emergency bridge loans and other financial concessions from its existing secured lenders and its landlord … to fund operations.”

Congress also took notice of Steward’s bankruptcy. The U.S. Senate Health Committee announced last month it was launching an investigation into Steward’s bankruptcy. Committee members accused company executives of lining their own pockets at the hospital system’s expense.